Roni Deutch, the self-styled “Tax Lady” has had her assets frozen by a Sacramento Superior Court judge and could face jail time on contempt of court allegations after allegedly shredding evidence , (shredding millions of documents) and failing to pay clients refunds in violation of a court order.
Calling Deutch a “predator for profit,” State Attorney General Kamala Harris on Wednesday asked a Sacramento judge to send Deutch to jail for five days and levy a $1,000 fine for each count of contempt connected to the allegations. California Judge Shellyanne W. L. Change froze the assets of “Tax Lady” Roni Deutch for the shredding documents and wrongfully diverting funds from clients of her tax law firm.
Sacramento Superior Court Judge Shellyanne W.L. Chang signed the order Wednesday freezing Deutch’s assets and appointed a receiver who will take over the financial aspects of her business. Deutch heavily advertises her services for helping clients resolve their problems with the Internal Revenue Service, but has been the subject of a $34 million lawsuit by the California Attorney General’s Office accusing her of swindling clients (see California AG Sues ‘Tax Lady’ Roni Deutch for $34M).
Attorney General Kamala D. Harris asked the court on Wednesday to hold Deutch in contempt of court, imprison her for five days on each violation, and fine her thousands of dollars for shredding millions of pages of documents and failing to pay refunds to her clients in violation of a court order.
“Deutch showed herself to be a predator for profit, preying on innocent, hard-working people who were simply hoping to settle their accounts with the IRS,” Harris said in a statement. “By defrauding these victims, and then pleading poverty, she created a real danger that her clients will never receive their advance fees back.”
In August, the attorney general filed suit against Deutch for swindling thousands of people facing serious and expensive tax collection problems with the IRS. On August 31, the court issued an order that prohibited Deutch from destroying evidence.
“Despite this order,” the attorney general said, “Deutch has been routinely shredding documents on an almost a weekly basis.” The Attorney General estimates that to date Deutch has shredded some 1,643,000 to 2,708,600 pages of documents. Deutch’s shredding campaign has permanently deprived the attorney general of evidence needed to fully prosecute the action against her.
Deutch’s law firm, based in Sacramento County, had revenues of at least $25 million a year. She spent $3 million a year on advertising, much of it on late-night cable TV, and frequently offered tax advice on popular TV shows. In her pitches, she promised to significantly reduce the IRS tax debts of people who signed up with her firm. Instead, she took thousands of dollars in up-front fees from clients but offered little or no help in lowering their tax bills. Hundreds of clients complained to the Attorney General and other government agencies.
Deutch is probably best-known for her brash style and late-night television commercials that promise relief to taxpayers who sign up for her firm’s services.
In August 2010, then-Attorney General Jerry Brown filed a lawsuit against the Tax Lady, accusing her of swindling her clients. The suit demanded Deutch return $34 million to customers and cease all advertising.
Brown alleged in the suit that Deutch’s North Highlands-based firm charged up to $4,700 per client, but did little work on their behalf. Less than 10 percent of clients have their federal tax debts successfully resolved, the suit said.
In addition to shredding documents, the Attorney General also charged that Deutch violated a November 17 preliminary injunction by failing to issue some $435,000 in refunds to her clients within 60 days. Instead she “decided to disperse funds to friends, family and other creditors. By draining her estate and that of the law firm, Deutch has placed her clients at serious risk of never receiving their refunds.”
For instance, Deutch opted to transfer hundreds of thousands of dollars in equity from the sale of her home to a media firm. She also personally withdrew $241,000 from the law firm’s accounts and her personal accounts at just one bank. In addition, since the preliminary injunction order was issued, Deutch made more than $21,000 in unnecessary expenditures, including gifts to family and friends, and a payment to a NASCAR racing team.
The attorney general asked the court to fine Deutch $1,000 and imprison her for five days for each count of contempt, to immediately freeze Deutch’s personal assets, and to appoint a receiver to manage her law firm’s business operations.
Deutch is no stranger to legal tussles. She paid $300,000 in fines and restitution in December 2006 in New York to settle a 2005 lawsuit filed by the New York City Department of Consumer Affairs, alleging deceptive advertising. Deutch denied wrongdoing, saying she wanted to avoid a court battle.